Skip to main content

Joint stock company and its formation

Short answer

A joint stock company is a separate legal entity with capital divided into shares, governed by the Companies Act 2063 in Nepal. Formation involves promotion, name approval, preparing MoA/AoA, registration with OCR to get incorporation certificate, and for public companies, issuing shares via SEBON prospectus and listing.

What is meant by 'Joint Stock Company'? Describe the procedure for forming a 'Joint Stock Company'.

Joint Stock Company

A joint stock company is an artificial legal person, formed by law, whose capital is divided into small units called shares, owned by its shareholders. It has a separate legal identity, perpetual succession and limited liability. In Nepal it is governed by the Companies Act, 2063 (2006) and registered with the Office of the Company Registrar (OCR). Types: private company (1 to 101 shareholders, shares not offered to the public) and public company (minimum 7 shareholders, shares can be offered to the public). Examples: Nepal Telecom, Nabil Bank, Himalayan Distillery.

Procedure for forming a company

  1. Promotion: Promoters get the idea, assess feasibility, and arrange initial finance and members.
  2. Name approval: Apply to the OCR for the approval of a unique name.
  3. Prepare documents: The Memorandum of Association (MoA: name, objectives, capital, registered office) and the Articles of Association (AoA: internal rules). Also details of directors and shareholders, and their consent.
  4. Registration: Submit the application with the documents and fee to the OCR. If satisfied, the registrar issues the Certificate of Incorporation; the company becomes a legal entity. A private company can begin business after this.
  5. Raising capital (public company): Prepare a prospectus, get approval of the Securities Board of Nepal (SEBON), and issue shares to the public (IPO) through licensed issue managers.
  6. Share allotment and listing: Allot shares, and list on NEPSE for trading.
  7. Other registrations: PAN/VAT with the Inland Revenue Department, industry registration and other licences. Hold the first meeting of directors and appoint auditors.
Promotion -> Name -> MoA/AoA -> Registration
          -> (Prospectus, SEBON) -> Share issue -> Business

✓ Answer checked by Claude Opus 5.5 (high effort)

Related questions

All Organization and Management chapter 4 questions →